Printed on July twenty first, 2022 by Bob Ciura
There isn’t a actual definition for blue chip shares. We outline it as a inventory with at the very least 10 consecutive years of dividend will increase. We imagine a longtime observe document of annual dividend will increase going again at the very least a decade, exhibits an organization’s capability to generate regular progress and lift its dividend, even in a recession.
Because of this, we really feel that blue chip shares are among the many most secure dividend shares that traders should buy.
With all this in thoughts, we created an inventory of 350+ blue-chip shares which you’ll be able to obtain by clicking under:
Along with the Excel spreadsheet above, we’ll individually evaluate the highest 50 blue chip shares right this moment as ranked utilizing anticipated whole returns from the Positive Evaluation Analysis Database.
The primary installment of the 2022 Blue Chip Shares In Focus collection will analyze The Andersons Inc. (ANDE).
Enterprise Overview
The Andersons is an agriculture inventory that conducts enterprise in North America. It operates by way of the next segments: Commerce, Renewables, and Plant Nutrient.
The Commerce phase contains commodity merchandising and the operation of terminal grain elevator amenities. The commerce phase contributed over 70% of the corporate’s income in 2021. The Renewables phase produces, purchases, and sells ethanol and co-products.
The Plant Nutrient phase manufactures, and distributes agricultural inputs, main vitamins, and specialty fertilizers, to sellers and farmers, together with turf care and corncob-based merchandise. The $1.3 billion firm was based in 1947 and has about 2,500 workers.
On Could 4th, 2022, The Andersons launched its first-quarter 2022 outcomes. For the quarter the corporate reported income of $3.98 billion, a rise of 53% versus Q1 2021, and adjusted earnings per diluted share of $0.18, down 48% versus Q1 2021. Plant Nutrient and Renewables had sturdy first quarter outcomes offset by a decline within the Commerce Group’s yearover-year outcomes. Commerce Group reported pre-tax revenue of $3.7 million in comparison with $14.3 million in the identical interval of 2021.
Supply: Investor Presentation
That is primarily because of a big run-up in commodity costs ensuing from the battle in Ukraine and drop in foundation values, primarily in corn and soybeans. The Andersons has a modest progress ambition for the approaching years. Administration introduced a “technique for progress” plan with an adjusted EBITDA between $375 – $400 million in 2025.
Progress Prospects
The Andersons’ long-term earnings progress observe document has been risky because of its business (commodity buying and selling) and because of the COVID-19 affect. During the last 5 years, the typical EPS progress fee is -1.3%.
We anticipate the corporate to develop its earnings-per-share by 5% per yr on common over the following 5 years. The corporate has observe document in risky markets with skilled buying and selling, logistics, and operations. Rising international demand, product innovation and M&A progress in fertilizers are key to success.
Supply: Investor Presentation
The corporate has an extended historical past of paying dividends and has elevated its payout for 26 consecutive years. In December 2021, the quarterly dividend elevated by 3% from $0.1750 to $0.18 per share. During the last 5 years, the typical annual dividend progress fee is 2.1%.
Aggressive Benefits & Recession Efficiency
As an agriculture firm, there may be all the time a sure degree of demand for The Anderson’s merchandise. This offers the corporate with regular earnings, even throughout recessions. The corporate carried out comparatively effectively throughout the “Nice Recession” of 2008-2009.
You possibly can see a rundown of The Anderson’s earnings-per-share from 2007 to 2010 under:
- 2007 earnings-per-share of $3.75
- 2008 earnings-per-share of $1.79
- 2009 earnings-per-share of $2.08
- 2010 earnings-per-share of $3.48
- 2011 earnings-per-share of $5.09
Whereas earnings-per-share fell considerably in 2008, the corporate shortly recovered. By 2011, earnings-per-share had been effectively above the 2007 degree.
As well as, The Andersons has a stable stability sheet, with ample money, enough liquidity, and manageable debt ranges.
Supply: Investor Presentation
In the course of the previous 5 years, the corporate’s dividend payout ratio has averaged round 103%. This excessive payout ratio is principally associated to low earnings-per-share in 2019 and 2020, whereas the corporate maintained its dividend progress coverage. We anticipate that earnings progress will likely be modest however steady, that means that there’s nonetheless room for the dividend to proceed to develop with a payout ratio under 30%.
The Andersons introduced 4 strong back-to-back quarter leads to 2021 and began to surge on the again of the Ukraine disaster. The corporate has been picked up by traders when the Ukraine disaster began because it was seen as a client defensive inventory and a commodity inventory.
Valuation & Anticipated Returns
In the course of the previous decade shares of The Andersons Inc. have traded with a median price-to-earnings ratio of about 33
instances earnings and right this moment, it stands at 12.3. We’re utilizing 22 instances earnings as a good worth baseline, implying the
potential for a valuation tailwind. The typical business price-to-earnings is 22.5.
If the price-to-earnings a number of expands from 12.3 to 22, future returns could be boosted by 12.3% per yr over the following 5 years. As well as, we anticipate 5% earnings-per-share progress every year. Lastly, shares have a present dividend yield of two.2%.
This results in whole anticipated returns of 19.5% per yr by way of 2027. We rank The Andersons inventory as a purchase.
Remaining Ideas
The Andersons is a worthwhile firm working within the agriculture business. The corporate has elevated its dividend for over 25 years in a row, whereas the present yield is effectively above the market common.
We imagine that the corporate’s earnings and income might proceed to develop modestly within the coming years. Income ispredominantly depending on the Commerce phase, which has a risky profile.
Nonetheless, with five-year anticipated returns above 19% per yr, shares earn a purchase ranking.
The Blue Chips listing shouldn’t be the one solution to shortly display screen for shares that often pay rising dividends.
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